Fitch Rates Verisk's Proposed Note Offering 'A'

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NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has assigned an 'A' rating to Verisk Analytics, Inc (Verisk) proposed issuance of seven year notes. Proceeds of the notes are expected to be used to repay borrowings under the credit facility, fund a portion of the unfunded pension obligation and for general corporate purposes. A complete list of the ratings is provided at the end of this release.

The new notes will be guaranteed by Insurance Services Office, Inc (ISO), and all of its subsidiaries that currently guarantee Verisk's existing notes, ISO's private placement notes and bank credit facility.

As with the notes issued in April of 2011, the proposed notes include a change of control put offer of 101% upon a change of control and subsequent downgrade of the notes to non-investment grade. A change of control includes any person/entity acquiring 50% or more of the voting control of the company, majority of directors of the board cease to be continuing directors, sale of all or substantially all the assets of the company, or the adoption of a plan for liquidation or dissolution. The proposed notes also include a limitation on liens of up to 7.5% of total assets (in addition to standard carve outs).

RATING RATIONALE:

Verisk's dominant market position within its Property and Casualty (P&C) insurance related businesses is reflected in the ratings (majority captured in its Risk Assessment which generates approximately 45% of revenues and 50% of EBITDA). Any competition for its industry standard programs and specific property information primarily comes from internal P&C insurance company departments.

Fitch believes that Verisk's core P&C insurance products are largely a non-discretionary purchase for most if not all of its clients.

The ratings reflect Fitch's belief that the company has the ability to organically grow revenues at least in the low single digits during an economic downturn.

Fitch believes there are very steep barriers to entry associated with Verisk's core insurance service businesses. Also, Fitch believes that the capital needed and operational disruption caused would make it challenging to replace Verisk.

Verisk's lack of ownership with respect to its core insurance related data and the potential for increased data cost is a concern for Fitch. This risk is mitigated by the rationale points discussed above and by the company's track record and long relationship with insurance companies and regulators.

The concentration risk to the P&C industry is also a concern for Fitch. However, the company has reported that its expansion to newer verticals has reduced its exposure to P&C customers from 82% in 2003 to 57% in 2010.

Fitch expects the company to maintain gross unadjusted leverage at or below 2.0 times (x).

Fitch expects the company to continue to be an active acquirer. There is tolerance in the ratings for leverage to go above this level for an acquisition, with the expectation that debt balance would be reduced in order to bring leverage back below 2.0x within a 12 to 18 month time frame.

RATING DRIVERS:

The ratings could be upgraded if the company were to target a more conservative unadjusted leverage metrics with a rationale for such a target.

The ratings may be downgraded if the company were to engage in a series of debt funded share buy backs that pushed unadjusted gross leverage beyond 2.0x.

The ratings may be pressured if a meaningful competitive threat to its Risk Assessment services were to develop.

LIQUDITY AND LEVERAGE PROFILE:

The company's liquidity consists of $53 million in cash as of Sept. 30, 2011 and $580 million of availability under its $725 million revolving credit facility due 2016, as of Nov. 28, 2011 (unadjusted for the proposed note issuance).

Fitch calculates free cash flow (FCF) as of the last 12 months ended Sept. 30, 2011 at approximately $360 million. Fitch's base case expects the company to generate FCF of approximately $350 million - $450 million in 2012.

Verisk had an unfunded balance of approximately $86 million as of Dec. 31, 2010.

Fitch expects the company to deploy cash towards acquisitions, reinvestment into the business and share repurchases.

Fitch expects the company to have sufficient liquidity to handle all of its maturities.

Verisk and ISO's near-term maturity schedule (not including the proposed note offering) consists of approximately $180 million due in 2013 and approximately $170 million in 2015.

As of Sept. 30, 2011, Fitch calculates gross unadjusted leverage at 1.75x and interest coverage of approximately 12x. Fitch expects continued EBITDA growth will reduce leverage, however, Fitch believes the company will manage leverage closer to its 2.0x leverage target over the long term.

Fitch rates Verisk as follows:

Verisk

--Long-term Issuer Default Rating (IDR) at 'A';

--Short-term IDR at 'F1';

--Senior unsecured notes at 'A'.

ISO

--Long-term IDR at 'A';

--Short-term IDR at 'F1';

--Revolving credit facility at 'A';

--Unsecured private placement notes at 'A'.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria & Related Research:

--'Credit Encyclo-Media Volume IV: Fitch's Comprehensive Analysis of the U.S. Media & Entertainment Sector' (Sept. 16, 2011);

--'Corporate Rating Methodology' (Aug. 12, 2011).

Applicable Criteria and Related Research:

Credit Encyclo-Media Volume IV: Fitch's Comprehensive Analysis of the U.S. Media & Entertainment Sector

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=651574

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

Fitch RatingsPrimary AnalystRolando Larrondo, +1-212-908-9189DirectorFitch, Inc.One State Street PlazaNew York, NY 10004orSecondary AnalystMelissa Link, CFA, +1-212-908-0611Senior DirectororCommittee ChairpersonMike Simonton, CFA, +1-212-368-3138Managing DirectororMedia Relations:Brian Bertsch, +1-212-908-0549Email: [email protected]

Source: Fitch Ratings

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